This year’s Money20/20 USA featured representatives of 3,500 companies, from too-big-to-fail powerhouses like Wells Fargo to hundreds of startups. Featured speakers included Virgin founder Richard Branson and “Shark Tank” star Barbara Corcoran as well as executives from Google, Amazon Pay, Morgan Stanley, Quicken Loans and Mastercard.
The surge in show attendance underscores the massive growth the financial technology industry has experienced over the past six years. Fintech startups raised $26 billion from venture capital funds over the first half of 2018, compared with just $3.8 billion for all of 2013, according to CB Insights, a private market intelligence firm. In fact, fintech companies have raised nearly $90 billion over the past 5½ years.
This emergence helped shape the big themes on display at Money20/20 — fintechs that are addressing some of the biggest pain points in the money industries, including the increased importance of the online experience, why social impact matters, how to reliably establish digital identity of online customers (thanks to pervasive data breaches and fraud threats) and how to exploit the promise of emerging technologies.
Here’s a list of the 7 big aha moments that I took away from the show:
1. Digital Identity is Hot
As more and more people conduct financial transactions online, the risks of fraud, money laundering and hacking are increasing. Traditional identity fraud involves an individual getting another person’s data and using it to open unauthorized credit card accounts in that person’s name.
In the Digital Identity & Biometrics track sessions, there seemed to be a growing chorus of the importance of “identity as a service” and how more thought needs to be given to how digital identity information is captured and shared across companies to better detect fraud and identify the good guys.
Airbnb’s Filip Verley went so far as to suggest that sharing economy companies could collectively leverage more together than individually in creating identity profiles for consumers. Airbnb, in particular, places great emphasis on reputation, and not just of the corporate reputation, but the individual reputation of their users (e.g., people have to earn those five-star reviews and present themselves in a certain light in order to be more accepted as prospective guests in a stranger’s home).
Others, like Capital One’s Andrew Nash, suggest that it is the banks already committed to KYC that should turn all their data points into a service that would equip businesses with all the necessary consumer-based identification information they need without having to store it themselves and become a target of breaches. The obvious question remains around identity data ownership. Many speakers posited that ownership should be in the hands of the consumers, but is that ultimately useful if consumers don’t understand the value of their data?
If you wanted to get a glimpse of just how hot the digital identity space has become, you just needed to wander into the exhibit hall. You’re starting to see a gold rush of new solution providers flood into this space using a broad range of technologies to help address the emerging digital identity problem. In fact, I counted 15 vendors in the exhibition hall that were touting some form of digital identity verification.
For a quick primer on these emerging modalities for identity verification, check out this handy comparison chart on the pros and cons of each methodology.
2. Biometrics Goes Mainstream
This year, biometrics emerged from the shadows and became a key theme, playing out on stage, in conversations and at the exhibition hall. The value proposition for biometrics in finance is security and convenience — with a strong emphasis on the latter. At Money20/20, it became quickly apparent that not only is this definitely the direction financial biometrics are heading, but in many tangible ways frictionless finance has already been achieved.
On October 22, Jumio announced its partnership with FaceTec, integrating the latter’s much lauded 3D facial recognition and liveness detection into the former’s Netverify customer authentication platform. In an interview with FindBiometrics, FaceTec CEO Kevin Alan Tussy called the partnership powerful, gesturing to his company’s certified presentation attack detection as a differentiating factor that led to the minting of the collaboration.
3. Removing Friction from the Process
Banks are closing branches at the fastest pace in decades, as they leave less profitable regions and fewer customers use tellers for routine transactions. The number of branches in the U.S. shrank by more than 1,700 in the 12 months ending in June 2017, the biggest decline on record, according to The Wall Street Journal’s analysis of federal data.
Given this backdrop, it’s not surprising that they will need to fill this gap by making their online channels as intuitive, seamless and effortless as possible. With increasing competition from challenger banks such as Atom and Monzo, traditional banks also need to move quickly to avoid losing customers. To be able to compete in the digital space, banks must understand the way in which technology and consumer expectations are evolving and shape their IT processes and investments around this.
Forward-thinking technology professionals across a range of industries are increasingly looking to create “invisible apps,” which aim to significantly reduce the amount of effort required by the user to create accounts and access services. In a survey commissioned by Jumio with Javelin Research, we found that 38 percent of customers bail out of the new account setup process because the online/mobile experience took too long.
4. Bank Issued Cryptocurrency
Although there are clear challenges and obstacles to be worked out, there seems to be steady progress of government and business offices toward blockchain-related technologies including Bitcoin and other types of coin offerings (ICOs). Dash Core Group CEO Ryan Taylor called central bank issued cryptocurrencies the “inevitable future.”
“I do think (the change toward crypto) is inevitable,” Taylor said. “(Governments) all are going — through either competitors’ pressure or through their own desires — to launch their own cryptocurrencies. But I don’t think it is where the greatest innovations will occur.”
This idea was echoed by Craig Ramsey, HSBC’s Global Innovation Lead for Global Liquidity & Cash Management, who talked about how central bank digital currencies will challenge other types of settlement systems.
“It doesn’t need to happen in the next six to nine months,” Ramsey said. “It’s too early to say which would win — it’s about the transition and dialogue that will create the ecosystem.”
Could a cryptocurrency really spell the end of fiat currency? Possibly, but only in very specific use cases. For example, if an economy is experiencing hyperinflation and the central bank has abdicated responsibility for its stability, then you could see a case for cryptocurrency.
5. Augmented Intelligence
I was fortunate enough to attend “Augmented Intelligence: The Future of AI,” an informative session by Naureen Hassan, Chief Digital Officer at Morgan Stanley. While AI and machine learning are core elements of the digital transformation, “we cannot forget that AI should augment and enhance the human element, not replace it,” noted Hassan.
“We need a world where professionals are supercharged, not supplanted by technology,” Hassan said.
With a call to find the right combination of AI-powered technology and human advice, Hassan encouraged attendees to embrace augmented intelligence as a means of supercharging the advisor-client relationship.
Hassan further discussed how augmented intelligence works best when two conditions are met:
- Large sets of structure data are available to test, retest and learn
- Trained experts are available to train and correct the technology
Hassan used the example of radiology where AI and machine learning can be used to identity anomalies, but you still want a trained radiologist to interpret the results. But, AI can be used to free up and supercharge the radiologist to improve the overall accuracy of the diagnosis.
At Jumio, we’re pioneering augmented intelligence to better identify fraudulent ID documents (e.g., driver’s licenses, passports and ID cards), identities, and even liveness detection. We’re fortunate to have both prerequisites (large data sets and trained verification experts) that are being leveraged to train our machine learning algorithms and make our fraud detection and risk scoring engine better.
6. Social Impact
Social impact was woven through a lot of the keynote sessions and had a dedicated track on Monday (Fintech for Social Good, chaired by Vikas Raj, Managing Director of Accion Venture Lab). The sessions touched on subjects of consumer financial health and its ties to upward mobility, improving access to capital through peer lending companies like Lending Club, and the importance of financial literacy as the next generation of financial customers mature.
To this last point, millennials and Generation Z are seen as more socially conscious than prior generations and I noticed a lot of speakers from companies that either seek to empower the financial consumers of tomorrow or set the stage for something larger than themselves (e.g., Stripe’s mission is to “increase the internet’s GDP”). Even rapper Akon took the stage to introduce his new fintech and cryptocurrency Akoin, which is geared towards providing a more stable currency for young entrepreneurs in Africa and bypass rampant corruption.
7. Open Banking
Open banking was one of the most discussed topics at the conference. No surprise, since the second iteration of Europe’s Payment Services Directive (PSD2) finally came into force in January this year. The concept of “open banking” is that a consumer can allow service providers to access data that is held by that consumer’s bank (or other payment account provider). Ultimately, it’s a way of facilitating data sharing between banks and service providers, assuming the consumer has provided consent.
Many big banks and financial players mentioned their current approach to open banking and their active role in contributing to a wider financial ecosystem. This was a marked shift in the way banks spoke about partnering with other companies and third-party service providers when compared to previous year’s conference. Last year I saw banks talk about financial inclusion, building digital products to meet consumer demand, and how to retain customers in today’s competitive banking environment. At the heart of open banking is consent: these service providers need to obtain explicit consent from the consumer and the consumer can rescind its consent as well.
I’m sure there were other notable themes at Money20/20, but I wanted to share our list with you and hopefully, hear about the themes that stood out for you.
Daniela Maldonado also contributed to this post.